Earnings season is always chock full of spinoff news. Valero (VLO) recently provided updates on its upcoming retail segment spinoff during its Q4 conference call and during a presentation at the Credit Suisse Energy Summit. PDF versions of the transcript & presentation can be found here. The new company, CST Brands, operates ~1,900 retail fuel and merchandise sites in the US and Canada, the vast majority of which are company owned. The company will assume over a $1b of new debt, the proceeds of which will go to Valero.
Here is what Valero had to say about the new company’s prospects:
We believe the separated retail business will perform well and unlock value for shareholders for several reasons. First, CST Brands will be the second largest publicly traded independent retailer of fuel and convenience merchandise in North America with nearly 1,900 sites. Second, these sites are located in geographically diverse regions: the southwestern United States and Eastern Canada. Third, many of the 1,032 U.S. retail sites are in Texas and surrounding states, which have strong economic growth. Fourth, CST Brands has substantial ownership of the sites with approximately 60% owned, not leased. Fifth, there’s a long history of strong financial performance and brand recognition. And finally, CST Brands has significant growth opportunities in merchandise, food service, and new-build locations.
You can read the Form 10 and judge for yourself. Assuming all of the regulatory hurdles are met, the plan is for Valero to spin out 80% of the company to shareholders sometime during Q2 with the remaining 20% stake being liquidated at a later date. The new company is expected to trade on the NYSE under the ticker CST.
For some more background on the company and transaction, check out our earlier post here.
Disclosure: Author holds no position in any stock mentioned.